Correlation Between Nevada Copper and Highland Copper

Can any of the company-specific risk be diversified away by investing in both Nevada Copper and Highland Copper at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nevada Copper and Highland Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nevada Copper Corp and Highland Copper, you can compare the effects of market volatilities on Nevada Copper and Highland Copper and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nevada Copper with a short position of Highland Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nevada Copper and Highland Copper.

Diversification Opportunities for Nevada Copper and Highland Copper

0.69

Correlation Coefficient

Nevada Copper  Highland Copper

Poor diversification

The 3 months correlation between Nevada and Highland is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nevada Copper Corp and Highland Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Copper and Nevada Copper is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nevada Copper Corp are associated (or correlated) with Highland Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Copper has no effect on the direction of Nevada Copper i.e., Nevada Copper and Highland Copper go up and down completely randomly.

Pair Corralation between Nevada Copper and Highland Copper

Assuming the 90 days horizon Nevada Copper Corp is expected to under-perform the Highland Copper. In addition to that, Nevada Copper is 1.59 times more volatile than Highland Copper. It trades about -0.06 of its total potential returns per unit of risk. Highland Copper is currently generating about 0.04 per unit of volatility. If you would invest  5.38  in Highland Copper on September 20, 2024 and sell it today you would earn a total of  0.59  from holding Highland Copper or generate 10.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	63.45%
Values	Daily Returns

Nevada Copper Corp  vs.  Highland Copper

Nevada Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nevada Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Nevada Copper is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Highland Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nevada Copper and Highland Copper

The main advantage of trading using opposite Nevada Copper and Highland Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nevada Copper position performs unexpectedly, Highland Copper can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Highland Copper will offset losses from the drop in Highland Copper's long position.

The idea behind Nevada Copper Corp and Highland Copper pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.